How Can Insurance Help Protect a Rental Property Business?

A well-designed insurance policy can protect rental property from losses caused by many perils, including fire, storms, burglary, and vandalism. (Earthquake and flood insurance are typically separate and, in some areas, coverage for mold claims may not even be available.) A comprehensive policy will also include liability insurance, covering injuries or losses suffered by
others as the result of defective conditions on the property.

Equally important, liability insurance covers the cost (including lawyer’s bills) of defending personal injury lawsuits. Here are some tips on choosing insurance:

• Purchase enough coverage to protect the value of the property and assets.
• Be sure the policy covers not only physical injury but also libel, slander, discrimination, unlawful and retaliatory eviction, and invasion of privacy suffered by tenants and guests.
• Carry liability insurance on all vehicles used for business purposes, including the manager’s car or truck.
• Make sure your policy is “occurrence based,” not “claims based.” Here’s the difference: a claims-based policy must be in effect on the date you make the claim—even if it was in place when the incident leading to the claim occurred. Under an occurrence-based arrangement, you can make the claim after the policy has ended, as long as the claim arose while the policy was in effect—which is obviously to your advantage.